Importance Of The Gold Standard

1510 Words 7 Pages
The Gold standard was exactly that, a global standard based upon the value of gold. It allowed the economies of the world to have a point of reference with each and every economy that adopted the gold standard. While it once was synonymous with the economic strength of a nation and economy. It eventually crumbled like all things that man creates, its importance should not be undervalued but it was a standard that did not grow with the times and was left behind. The history of gold is an interesting one because it has no real intrinsic value with the exception of modern day computing with superconductors. That being said, gold has gone throughout human history as a reason for exploration, exploitation, and exasperation, a universal currency …show more content…
Almost uniformly gold was seen as valuable throughout the world, either it was in Europe, Asia, Africa, and beyond when trading was concerned. with a globally based worth this made international trade easier if the currency held value all over the world. Secondly, it was naturally scarce making forgery difficult, further solidifying its worth. When printing currency if it cannot be backed by gold, its worth is undetermined, and is fickly based upon a form of trust, whether or not the nation or bank would be able to pay their debts effectively. Lastly Inflation is practically impossible, prices would stay low, and if inflation did happen it would happen within the entire gold standard market for the different currencies would be linked by the worth of gold. Hyperinflation such as the case in Zimbabwe would effectually be impossible for the worth of gold would not be able inflate by millions of percent around the …show more content…
When importing the money would delate making their exports more viable in a global market, and the opposite happen with exporters, when exporting the currency inflated leading them to become less competitive than before. This self regulation of international trade allowed countries from all over the world to trade as equals. However, since we do not have the data for a highly competitive import export based economy like today with a gold standard, we can only make assumptions based upon the more limited trading ability of the past. But from what we do know, competitive traded markets are better for both parties. Making the equality from the gold standard actually hindering the production possibilities by having united trade rates. With a combination of cost of exporting and importing based upon technology at the time and the gold standard, international trade was gimped in terms of movement of goods and capital, but also of comparative advantage. In addition to the problems of having the Gold standard, with differing standards such as the silver standard also competing throughout the world, it it further lowers the trade ability between nations with different standards. When much of Europe adopted the gold standard, it made counties such as japan unable to trade trade effectively when they had the silver standard. This prevented truly free trade leading

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